CoreWeave Faces Dual Shock in Stocks and Bonds! Share Price Plummets 15%, Bonds in Trouble, Musk Exclaims "Scary"

The cracks in AI infrastructure financing models are accelerating and widening.

Under the dual pressures of unexpectedly hot inflation data and rising U.S. Treasury yields, data center operator CoreWeave’s stock plunged over 15% on Wednesday, marking the third-largest single-day drop in its history and bringing it to the brink of its all-time low.

At the same time, the yield on the company’s bond due 2032 broke above 15%, officially entering the distressed zone. This sell-off wiped about $80 billion off the combined market cap of several AI infrastructure stocks, including CoreWeave, in just one day.

D.A. Davidson analyst Gil Luria issued a warning on a podcast, stating that if CoreWeave is unable to service its high-cost debt, the company’s “equity value will be wiped out.”

According to Bloomberg, CoreWeave CEO Mike Intrator responded with an internal memo characterizing the stock plunge as an “irrational” market response. He expressed continued confidence in the company’s business model, financial position, and order backlog, asserting that the size of the backlog is sufficient to cover all debt obligations.

This sell-off is not an isolated event. Persistently hot U.S. inflation data has pushed the 30-year Treasury yield up to 5.63% intraday, exposing the hidden risks in the financing models of capital-intensive AI businesses.

Oracle fell about 9% in a single day, Dell Technologies dropped more than 11%, AI infrastructure provider Nebius slid 10%, and the Nasdaq 100 Index as a whole fell 2%.

Signals of distress in CoreWeave’s bonds surfaced weeks ago, but the equity market only reacted this week.

According to LSEG data, CoreWeave has issued about $22 billion in bonds and $26 billion in loans. The company’s bonds issued in June this year carried a coupon of 9.625%, but the yield has now risen to about 15%—levels typically seen only in CCC-rated or lower junk bonds.

The price of the bonds has fallen below 80 cents on the dollar, officially entering what the market defines as “deep distress.” The spread over Treasuries has also breached the 1,000 basis points threshold that signals default risk.

WallstreetCN reported that this Nvidia-backed AI cloud service provider has raised more than $35 billion this year via chip-backed loans, high-yield bonds, convertible bonds, and equity offerings.

Co-founder Brannin McBee stated that once more chip-backed debt receives investment-grade ratings, CoreWeave will be able to tap into insurance company funding, where capital “is unlimited—it’s all of the money in the world.”

CreditSights analyst Jordan Chalfin told the Financial Times that although CoreWeave is “highly creative” in its financing, investors are deeply concerned about the mismatch between its long-term data center leases and its relatively short-term customer contracts.

He asked:

If there’s a glut in supply, why would customers renew contracts with CoreWeave?

Even Elon Musk responded to the stress in CoreWeave’s bonds on social media, stating, “There is indeed huge demand for supercomputer data centers, but raising money for construction that involves major power, cooling, and networking hardware systems is entirely different from execution in reality.”

Luria’s key argument points directly at the fundamental flaw in CoreWeave’s business model: the company borrows at around 9% interest rates, but its investment return is only about 1%, and even based on management’s target of 4% to 5%, that remains below the cost of financing.

He likens this to borrowing at a 9% rate to buy U.S. Treasury bonds yielding just 5%—a value-destroying strategy.

The financial data backs this up. CoreWeave’s net interest expense in Q2 reached $640 million, doubling year-on-year (from $267 million a year earlier), while net loss for the same period was $626 million, with interest expense accounting for about 25% of that quarter’s revenue.

As of the end of June this year, CoreWeave’s total debt and lease obligations stood at about $52 billion. According to Visible Alpha consensus estimates, from 2026 to 2028, the company’s cumulative negative free cash flow is expected to reach $71 billion; this year’s projected figure is negative $25 billion and next year’s is negative $28 billion.

Responding to external concerns, CoreWeave co-founder Brannin McBee told the Financial Times that he “absolutely does not think this debt load is troubling,” stating that borrowing is meant to accelerate company expansion.

He also said the company expects to achieve investment-grade credit ratings “within a few years,” and claimed, “If we stopped building today, [the company] would immediately generate strong positive cash flow.”

However, according to S&P Capital IQ, CoreWeave’s three co-founders have cashed out about $2 billion this year by selling stock. McBee characterized these transactions as personal wealth diversification and stressed that most of their wealth remains in company shares.

On prediction market platform Polymarket, traders currently give CoreWeave a 17% chance of declaring bankruptcy before December 2027, rising to 27% by 2029.

CoreWeave’s predicament reflects broader market anxieties: in a persistently high-interest-rate environment, the financing logic of capital-intensive AI infrastructure companies is facing systemic scrutiny.

Baird investment strategy analyst Ross Mayfield told Reuters:

When long-term rates are north of 5% and moving toward 6%, it’s a problem for marginal borrowers. For those below the Big Four hyperscale cloud providers, conditions will be much tougher.

By contrast, hyperscale cloud providers such as Alphabet, Microsoft, Meta, and Amazon—with their high profitability and robust management—have been relatively resilient during this sell-off, with most stocks dropping by around 2%.

Jed Ellerbroek, a portfolio manager at Argent Capital Management, pointed out that these four companies, together with SpaceX, account for roughly 75% of all data center investment in the U.S., and that their data center investments have yielded strong returns.

However, CoreWeave is currently seeking to secure lower-cost funding from insurance companies to sustain its AI infrastructure build-out. But analysts note that, with its unsecured bonds now yielding more than 15%, the outlook for accessing capital cheaper than its current structure is not optimistic.